Ofcom boss warns of low interest in 'superfast' broadband

Ofcom chief Ed Richards has warned that cash-strapped UK consumers lack enough incentive from ISPs in the country to upgrade to "superfast" broadband packages.

Richards said that the virtual form of Local Loop Unbundling, dubbed VULA, needed to meet a variety of "key requirements" in order to "open up as much of the network, control and ultimately value as possible to competition in order to replicate many of the LLU-driven benefits".

He continued, in a speech in London yesterday, by saying that: "VULA must therefore meet a number of key requirements, such as local physical interconnection, service agnostic un-contended capacity and place the maximum control possible in the hands of customer communication providers."

Richards is concerned, however, that the national telco BT won't be applying the same business principles to superfast broadband that happened under the existing copper infrastructure. LLU meant rival ISPs could get more access to BT phone lines, hence improving overall competition in the sector.

"For superfast broadband the picture is subtly different," said the Ofcom boss.

"Our strategic principle, when applied, does not lead us to conclude that competition based on multiple providers deploying their own fibre networks in the same area will happen, or that it would be effective and sustainable. Industry players seem to share this view."

Ofcom has given BT plenty of wiggle room with how it handles VULA. The justification being that next-generation access is a risky business and regulation needs to be light-touch to help the potential market thrive.

There's also a case, Richards argued, for the fact that the price for such superfast services would be "constrained" by the existing broadband market, where prices are governed by regulation and competitive pressures.

What's more, the regulator has been fretting about take-up of the fibre-optic technology among households. According to Richards, the case for such a premium upgrade isn't compelling enough outside of the idea that younger people are scrabbling for more bandwidth to stalk friends on social networks.

He told attendees at the Total Telecom World conference yesterday:

For superfast broadband, subscriber numbers are still low, perhaps because the nearest thing we have found to a ‘killer app’ so far is the demands of the multi-user household.

Amid a cornucopia of entertainment and information services, and the promise of advanced telemetry, e-health and interactive education, it is interesting that the only ‘killer app’ we have so far is the presence of teenage children.

Social networking, streaming and sharing from the teenage bedroom, leading to local contention, the victim of which is the person typically paying the bill, seems to be among the strongest reasons for adopting superfast broadband.

But as an approach to promoting superfast broadband take up, ‘having more teenage children’ seems a little long term, and a little distant from reality.

Richards argued that there was uncertainty within the broadband sector about both the level of demand for a superfast network as well as for the willingness to pay for such a service. Despite that, he noted that data consumption had risen dramatically. Traffic over the London Internet Exchange's routers has shot up "seven fold in the past five years," he said.

On average, residential fixed broadband customers are now using 17GB of data each month, according to Ofcom in its Infrastructure report published last week.

Richards then went on to undermine his comment about the relevance of the teen2.0-set.

"This trajectory seems certain to feed through to a demand for increased speed – the fact that we cannot identify specific ‘killer apps’ beyond bandwidth hungry teenagers is in some ways beside the point. The industry recognises this almost inexorable process and the transition from copper to fibre is therefore already well underway."

Richards said that the "'early fibre' era" was hampered by the fact that investors and companies are nervous about the greater risk involved with meddling in that technology.

"Compared to the transformation wrought by moving from dialup to basic broadband using an existing copper network, there is considerably more uncertainty in almost every respect," he warned.

But - short of convincing the industry to bring down the superfast price tag for consumers - competition within the market is likely to be sluggish, which of course could stall the Secretary of State's grand plans to make the UK's broadband network the fastest in Europe by 2015. ®